Advertising is not an exact science and this is why it can be quite challenging to measure the effectiveness of an ad campaign. That said, measuring this effectiveness and the performance of an ad campaign is key if you want to know if the amount spent or invested is worth it.
To see if an ad campaign is effective, businesses need to keep an eye on some key metrics and do some calculations to give them a rough idea on where they stand. Here are a few of the key metrics and calculations you need to know about.
Check the Impressions
In advertising on streaming platforms, impressions represent the number of times your ad was shown to people and can be a key indicator of how many people could have seen your ad. Remember that impressions do not give you any information about your reach, which is the actual number of people who saw your ad(s).
A low impression count shows that your ad was only shown a few times meaning that it reached a small number of people. The opposite is true for a high impressions count.
A low impressions count can show that the amount you are spending is not worth it considering you are not getting the results you need. However, if you are running a highly targeted campaign, a low impression count is to be expected. If you are running a more generalised ad campaign, a high impression count is preferred, although that tells you little about your ad campaign’s reach.
Click Rate and Click-through Rate
The click rate (clicks) is the number of people who actually clicked your ad, even if it was not specifically targeted towards them. These are people who are interested in your business or its products and services and are often more open to completing a purchase.
The click-through rate is also the number of people who clicked an ad, with the distinction being that they were specifically targeted and served your ad. It is the percentage of people who were served your ad who decided to click on it. It is calculated by dividing your clicks by the number of impressions on the ad.
A high click-through rate indicates that your ad copy is resonating with your target audience. It is often looked at beside the conversion rate which we will discuss below.
Calculate the Return on Investment
Advertising is just like any other investment you make in your business; you put money (invest) into advertising and expect a return on your investment. Tracking the return on investment (ROI) of your ad campaign is extremely important if you want to know whether the amount invested in the ad campaign is worth it.
The ROI is calculated by subtracting the amount generated by an ad campaign from what the campaign cost. A positive ROI shows the campaign is working and is worth it and the opposite is true for a negative ROI.
When you have a positive ROI, you can increase it by trying to get more sales or outcomes from customers that have already bought from or engaged in your business in some way. For example, if an ad was breaking even or producing a positive ROI for every 30 contacts, you should aim to increase that number to two from the same contacts, and so on.
Alternatively, the business could try to lower the cost for each cost or lead generated. This is often challenging because a business has to wait for the ROI numbers to come in before it starts thinking about decreasing the cost of each contact.
There are lots of modern tools that can help you optimise your ROI, but they go hand in hand with the right skills for revenue and loss calculation and financial management. Business leaders and those who are interested in helping businesses strengthen their bottom lines can complete the distance learning MSc finance and management programme at Aston University. Beyond these financial skills, the programme also teaches the leadership and technological skills you would need to thrive in a highly competitive and technologically dependent world.
Conversions
Whether people clicked on an ad specifically served to them or not, you want them to convert. You also want them to convert even if they got on the landing page any other way. In advertising, converting is taking the desired action, whether it is taking you up on an offer, signing up to an email newsletter or signing up for a webinar.
Conversion rate is the percentage of people who saw your ad, clicked through and then converted. Your conversion rate is calculated by dividing the number of conversions by the number of clicks.
A high conversion rate shows that people want what your ad offers, and you make it easy for them to get it. A low conversion rate indicates your ad campaign might be targeted very well but your landing page’s offer does not align with what was on the ad. It could also indicate that the offer on your landing page is wrong for the type of people who click on your ad(s).
If your ad and landing page are well aligned, thus leading to a high conversions rate, then what you are spending on your ad campaign is worth it.
Calculating the Cost Per Conversion
The cost per conversion is how much is spent to get one person to convert. To get the cost per conversion, you divide the total cost of the campaign (what you have spent) by the number of conversions when the ad was running.
You should be aiming for a very low cost per conversion because it means you are spending very little to get one person to convert. This means your ad budget is being used efficiently as it is driving quality visitors and leads to your website.
If the cost per conversion is too high, then you are spending money targeting the wrong audience and need to re-evaluate your campaign.
There is so much more that goes into knowing whether what you are spending on an ad campaign is worth it. The key metrics discussed above all work together to show whether you are on the right path or need to rethink your ad campaign and digital marketing strategy.
